Fair Play in World Trade Towards a Social Democratic Redesign of Trade Policy

DECEMBER 2018

FAIR PLAY IN WORLD TRADE TOWARDS A SOCIAL DEMOCRATIC REDESIGN OF TRADE POLICY

Thorsten Schäfer-Gümbel with Bernd Lange MdEP, Matthias Miersch MdB, Sascha Raabe MdB, Dirk Wiese MdB, Fabian Bohnenberger, Clara Brandi, Herta Däubler-Gmelin, Alexander Geiger, Heike Joebges, Florian Moritz, Hubert Schillinger, Evita Schmieg, Jochen Steinhilber and Johanna Uekermann FAIR PLAY IN WORLD TRADE

Contents

Summary ��3

Preface ��4

A New Debate on Trade ��5

Conflicts and Trade-offs in International Trade Policy ...... 7 Between Liberalised Markets and Democratic Decision-making Autonomy ��7 Between National Control and a Common EU Trade Policy ��7 Between the Winners of Globalisation and Greater Prosperity for All ��8 Between Multilateral Rule-making and Bilateral Preferentialism ��8 Between Economic Objectives and Sustainability ��9

Guiding Principles for a Social Democratic Trade Policy ��11

A Social Democratic Reform Agenda ��12 1. An Inclusive and Solidarity-based Approach to Redesigning the Trade Architecture �� 12 2. Strengthening Democratic Processes and Transparency in Trade Policy �� 13 3. Promoting and Enforcing High Labour Standards ��14 4. Protecting the Rule of Law by Balancing Investor Rights with Investor Obligations ��16 5. Reducing Current Account Surpluses and Supporting the Losers of Globalisation �� 17 6. Achieving Social and Environmental Sustainability through a Coherent Trade Policy ��18 7. Placing a Stronger Focus on Global Value Chains ��18

The Authors ��19 FAIR PLAY IN WORLD TRADE

Summary

Trade policy has an impact on the everyday lives of many n To shape global trade policy structures collectively people – in Germany, and indeed the world over. Trade through a solidarity-based approach. This includes policy must, therefore, not be an end in itself but has to strengthening the role of the WTO as a monitoring, serve broader objectives. It must be based on fair multi- enforcement, and dispute settlement body, always lateral rules and take all aspects of sustainability into con- negotiating plurilateral agreements as open agree- sideration. Here, the social-democratic approach differs ments under the auspices of the WTO, and making fundamentally from that of market liberals in its belief it mandatory for bilateral agreements to comply with that trade relations must follow politically defined rules. WTO rules.

For us, a fair and democratic trade regime is one in which n To reinforce the rule of law and binding obligations the goods that are traded on our markets are produced for investors. This comprises placing foreign and under fair social and environmental conditions and hu- domestic investors on an equal footing, protecting man rights are respected; in which we strive to safeguard specific areas like labour and social law, public ser- and improve the development prospects of our trade vices, and international obligations such as climate partners in the global South; in which trade strengthens protection from legal action by investors, and making rather than undermines rights; in which the government’s companies’ rights more heavily contingent on the ful- capacity to provide public services, both here in Germa- filment of obligations with regards to transparency, ny and in our partner countries, is not restricted; and in preventing tax evasion, and conforming to standards, which we give multilateral approaches precedence. The for instance. process of negotiating trade agreements must also become more democratic and transparent. n To reduce Germany’s current account surpluses. This would mean, for example, substantially increasing in- What we need, therefore, is a new trade policy, one which vestment in education, transport infrastructure, digi- can be shaped and one which rebuilds trust, strengthens talisation, and the transition to renewable energies in democracy and the rule of law, and enforces justice. the years ahead.

Our objectives are therefore: n To promote and enforce sustainability standards. This involves requiring all trade partners to have at least n To strengthen democratic processes and transparen- ratified all eight core labour standards before a trade cy in trade policy. This entails expanding the right of agreement can enter into force, providing civil society control and decision-making powers of the European organisations in the advisory groups set up by the EU Parliament, ensuring that trade policy debates also full access to documents, establishing a new dispute take place in national parliaments, ensuring also that settlement mechanism in which trade unions are also trade union and civil society representatives are given given an opportunity to demand compliance with the an opportunity to participate in the processes of ne- agreed standards, and granting developing countries gotiation and implementation, and promoting public positive trade preferences if their products are sus- debate on trade policy objectives. tainably manufactured.

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Preface

Dear Readers,

Two years ago, tens of thousands of people took to the sumer standards. In the meantime, the key issues have streets. Party offices were inundated with letters and calls become a lot clearer: we need more public discussion from citizens. The SPD hosted a Party Convention on the and debate on trade policy. We can only rebuild confi- issue. And all this activity was triggered by a widespread dence that trade policy will be organized in a transparent protest that had mobilized citizens against the Transat- and democratic manner if we take clear positions and lantic Trade and Investment Partnership (TTIP). Supply hold discussions on contentious issues, both in society chains and ILO core labor standards became as much a and in parliaments, and set binding rules for the mar- part of the vernacular as talk of chlorinated chickens and kets. To be able to play an active role in shaping trade courts of arbitration. A lot of water has passed under the policy, however, Germany must also continue to build up bridge since then. In just a short time, Donald Trump’s trust beyond its borders, for example by taking seriously antics have transformed the trade policy debate beyond the criticism expressed by many of our trade partners of recognition. With his »America First« policy and its fo- its enormous current account surpluses. cus on partitioning, Trump has intensified trade conflicts and incited new (and fueled old) antagonisms. In so For us social democrats, a fair trade policy is an essen- doing, crises have been provoked which undermine the tial building block toward creating a fair global order. In very existence of the rules-based system of global trade. view of the challenges I have just mentioned, we need a Trump is also sending the disastrous message to the in- coherent programmatic basis for our trade on all political ternational community that it is better to tackle global levels. This publication aims to provide that foundation. challenges unilaterally and driven solely by self-interest. It was written in cooperation with experts from politics, science, industry, trade unions, and civil society. It puts Germany, on the other hand, relies more than any other into words structural objectives derived from this collab- country on open markets and a fully functioning global oration that can be used as a basis for social democratic economy. However, even beyond the conflict with Wash- trade policy; moreover, it outlines the main features of a ington, the international trade system is in need of reform. fair and just trade policy and what priorities such a policy The latest round of major trade negotiations, the Doha should set. We envisage our paper as a contribution to Round, which commenced in 2001, has broken down. the discussion on how international trade policy should At the moment it seems impossible to reach a consensus be shaped, but also as providing guidance to parliamen- among all 164 WTO member states. We therefore need tary, governmental, and civil society decision-makers. It to rethink trade policy. But what form might a progressive is our intention to provide direction. trade policy take? And how can progress be achieved under the auspices of the World Trade Organization? I would like to thank everyone who has made a direct contribution to this paper, as well as the many experts Not only has it become more difficult to reach a consen- who supported us and enriched our knowledge with their sus between trading blocs and countries. Also within Eu- input during our workshops. I would also like to extend rope and within Germany, trade that exclusively follows my sincere thanks to the Friedrich-Ebert-Stiftung, and in the radical free-market paradigm is justifiably criticized. particular to Jochen Steinhilber and Alexander Geiger, For far too long trade was viewed through rose-tinted who, with great vigor, sound argumentation, and sub- spectacles, while the losers were forgotten in the de- stantial motivation, helped this paper come to fruition. bate. Politicians must largely take the blame for these shortcomings. Opaque negotiation processes and the I hope that you will enjoy reading this paper and that you influence of large corporations must be made as central will glean valuable insights from it for your own work. to the debate as the issue of what should be included in trade agreements in terms of public services and con- Kind regards – Thorsten Schäfer-Gümbel

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A New Debate on Trade

As a result of the financial crisis the liberal paradigm of problem of inadequate corporate responsibility along open international markets and the free movement of global supply chains; but also, more generally, they un- capital and goods has come under pressure to prove derlined the need to reinforce labour, social, and envi- its legitimacy. Initially this only applied to the financial ronmental standards in international trade agreements. markets themselves but now the international trading There has also been renewed discussion over whether regime is also under fire. In Germany and in Europe as and to what extent the current trading regime meets the a whole, the sheer intensity and scope of the criticism needs and interests of developing countries. EU trade took policy makers by surprise. Social democratic policy policy should not be about sacrificing development pol- makers were no exception to that. icy objectives for the sake of short-sighted commercial interests. Germany’s and the EU’s economic and export Nowadays, free trade is increasingly under scrutiny, the strength should not be to the detriment of weaker coun- reason being that it by no means benefits everyone. On tries. Moreover, in view of growing global migration, we the contrary, free trade produces both winners and los- must also ask ourselves how the trade policy of the fu- ers. Political decisions such as wage restraint, social cuts, ture has to be designed so as to help improve the situa- and tax competition, which are sold as necessary in the tion in poorer countries, particularly in the neighbouring interest of open markets and international »locational Africa region. competition« for trade and investment, fuel growing inequality. Economic and social dislocations have led to Lastly, the aforementioned controversies must also be an increase in support for nationalist forces. If we fail to viewed as a consequence of the fundamental changes tackle the problems, there is a risk that (right-wing) pop- in the working and economic world. The fragmentation ulist parties and movements will also continue to gather of production processes along global supply chains is momentum. already at an advanced stage, and now digitalisation is driving a transformation which is also fundamentally The criticism from broad sections of civil society is di- changing the world of trade. Bearing this in mind, the rected largely at the »deep« free trade agreements that current trade rules, written before the age of the Inter- have become the norm nowadays and that go well be- net, have to be adapted to new developments. Especial- yond the traditional dismantling of tariffs. Negotiations ly the extremely fast-growing cross-border e-commerce on the Transatlantic Trade and Investment Partnership market and cross-border service provision via digital plat- (TTIP) agreement with the USA as well as the EU-Canada forms present a whole gamut of new challenges that re- Comprehensive Economic and Trade Agreement (CETA) quire a legal framework set down in intergovernmental have been strong catalysts for mobilisation within Ger- agreements. Determining for which issues trade agree- many. Critics have not only taken issue with the lack ments are the correct regulatory instruments should also of transparency in the negotiation process. They also be part of this debate. Another key issue is ensuring that fear significant encroachment on the democratic deci- the rules agreed upon do not further consolidate the sion-making autonomy of nation-states – an imbalance market power of a small number of digital giants but in favour of the interests of transnational corporations instead promote competition and provide sufficient pol- at the expense of other economic, social, and environ- icy space for states to develop and expand their own mental objectives – and thus a weakening of democracy digital economy, with the aim of bridging the growing and the rule of law as a whole. This criticism is one that digital divide. Other challenges include the fair taxation social democrats and their partners, including the trade of internet companies’ sales and profits and the struggle unions, also broadly share. against the emergence of new precarious employment conditions in the »gig« economy. Any new trade rules Not only did scandals such as the collapse of the Rana for the digital economy must be discussed with a view Plaza textile factory in Bangladesh in 2013 and the fires to strengthening digital civil rights and within the frame- that broke out in other textile factories bring to light the work of clear-cut data protection regulations.

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Disputes over international trade imbalances also per- ing the openness of markets which are already largely sist. At the European and the global level, Germany is liberalised, a progressive trade strategy must provide an- being castigated for its foreign trade surpluses. This crit- swers, among others, to the following issues: icism is not about the exports per se but about the fact that Germany has dramatically expanded its exports a) Should sectors which do not or only partially follow without increasing imports of goods and services from market principles be opened further? What objectives its trading partners accordingly. For years, the world’s and interests should such market liberalisations serve? fourth largest economy has thus recorded a persistently What would the conditions for this be? high and ever-increasing current account surplus. Ac- cording to the critics, this means that, in times of crisis, b) Agreements over the harmonisation or the (mutual) Germany has been creating and securing employment recognition of standards and regulations should serve to at the expense of its trading partners, depriving the reduce trade costs or guarantee fair conditions for inter- global economy of much needed demand, and, rather national competition. What standards and regulations than helping deficit countries reduce their debt, it has – for instance in the fields of health, environmental and in fact been making it more difficult for them to do so. consumer protection – with regard to wages and em- This makes the global economy even more susceptible ployment conditions, the fight against corruption and to crisis. tax avoidance, should be part of trade agreements in future and what should not be included? What forms of The rise of large emerging countries, especially China, cooperation and type of agreements (e. g., »living agree- radically changes not only trade flows but also the in- ments«) could play a role here? ternational power structure. The Trans-Pacific Partner- ship (TPP) trade agreement which was abandoned by c) Can we, in future, prevent growing inequality or the US President Trump immediately after he assumed of- development of even larger groups of »losers of globali- fice was an attempt by his predecessor administration sation« among the poor, the working and the middle to secure US influence in Asia and, at the same time, class as a result of greater market opening, both in rich to establish international standards important to the US and poor countries, and if so, how? that could not be pushed through within the WTO due to opposition from developing countries. TTIP, the nego- d) Does trade policy support the global objective of sus- tiations over which have been on ice since the new US tainable social and environmental development for all in administration took office, had similar objectives. To the accordance with the 2030 Agenda and the Sustainable extent that Trump’s trade policy is focusing on purely bi- Development Goals? How does it achieve this? lateral rather than regional and multilateral agreements and the US is abandoning its former role as the domi- e) How can we ensure that global trade continues to nant force in shaping international cooperation regimes, adhere to multilateral rules and that the strong and fair this creates a political vacuum that will be filled by other trade system of the future also protects the rights of the players. world’s weaker economies?

In Germany, which is more heavily integrated into the The current transitional situation presents social dem- international division of labour than other similarly sized ocrats with an opportunity, namely the opportunity to countries, many top-level and well-paid jobs depend on rethink trade policy as part of a sincere stock-taking pro- foreign trade. Germany therefore has a fundamental in- cess and to participate politically in its redesign based on terest in open markets. Beyond this interest in maintain- a set of social democratic values and objectives.

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Conflicts and Trade-offs in International Trade Policy

Between Liberalised Markets and an Council bodies to assert their influence. The national Democratic Decision-making Autonomy parliaments have the task of mandating and monitoring their respective governments, for instance by way of a In trade policy, one of the major challenges is to uphold dedicated trade committee along the lines of the Danish and expand democratic policy space and safeguard the Parliament’s model. This democratic control of European primacy of politics. After several global liberalisation trade policy was reinforced by the 2009 Treaty of Lisbon, rounds over the last decades, the importance of tar- which granted the European Parliament a substantially iffs has dwindled, with the average duty on finished larger say in decision-making. The EP now plays an active products within the OECD now at less than three per part in the negotiations on trade agreements and has to cent. Nowadays, negotiations therefore focus primarily approve them in order for them to enter into force. on reaching agreements on domestic regulations such as technical, health and employment standards, com- In the era of »deep« trade agreements, the intertwin- petition, or public procurement. To date, negotiation ing of national and EU competences across many policy rounds have been largely opaque. In the event of con- fields brings about additional challenges for policy-mak- flicting goals, this carries the risk that vested interests ing in the area of trade. One such challenge concerns the of corporations, regarding market access, cost savings, EU’s capacity for action as a union of states. The Europe- investment protection, etc. will prevail over consumers’ an Court of Justice (ECJ) opinion of May 2017 (regarding and workers’ interests. Critics also fear substantial en- the negotiated EU-trade deal with Singapore) on the is- croachment on the democratic decision-making auton- sue of competence sharing in trade agreements provided omy of nation-states. more clarity on this. In its opinion the ECJ confirmed that the overwhelming part of the agreement falls within the The crux of the challenge is to facilitate a reasonable EU’s exclusive competence. The ECJ only acknowledged convergence of standards alongside regulatory coop- shared competences between the EU and the Member eration with international trade partners, at the same States in two areas, namely portfolio investment and in- time ensuring that democratic principles are respect- vestor-state-dispute settlement, the latter a topic that ed, applied, and under no circumstances undermined. had become highly controversial in public debate. As a Trade agreements must not be excluded from the social result of this, future EU-trade agreements could be rou- and political debate. tinely »split up« into two separate agreements, with the main agreement falling under exclusive EU competence and the smaller »shared part« having to be additionally Between National Control and ratified by all 28 EU Member States. In the meantime this a Common EU Trade Policy has happened with the EU-Singapore agreement, where both parties agreed to have a separate investment pro- Trade policy – i. e. external trade relations – is one of tection agreement alongside the main trade agreement. the few EU policy fields that is almost entirely communi- A second option, at least in some cases, would simply tised. This competence, which was already set out in the be to have no agreement on investment protection at founding treaties, was gradually transferred to the then all. The clarifications brought about by the Singapore European Community (EC) when the customs union was ruling should also lead to an increasing awareness of the completed. Since then, the authority for trade in goods tasks, competences, and opportunities to influence pol- resided at the European level, and this was extended to icy decisions that both the European Parliament and the include trade in services following the Treaty of Nice of German Bundestag have when it comes to trade policy. December 2000. It is therefore only within the EU that Germany can decide on trade policy measures, which are While the European level is responsible for negotiating proposed by the European Commission. Consequently, trade agreements, the design and the implementation national governments have to use the relevant Europe- of the necessary flanking policy measures fall within the

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competence of the Member States. Trade policy must be The substantial absolute income gains are enjoyed pre- supported by, for example, education and labour market dominantly by a small upper class comprising traditional policies, by structural and redistributive policies, as well but also new elites. Moreover, particularly in the larger as by trade promotion. Such policy measures are vital in emerging economies in East and South-East Asia, a new order to prevent, or at least mitigate, the negative con- global middle class has recorded substantial relative in- sequences of countries opening their markets and to be come gains, albeit from a low starting point. Although able to take full advantage of the new opportunities that there are now many countries with a growing middle arise from trade agreements. class, the problem remains that so many people are forced to live on or even below the bread-line and are unable to benefit from economic liberalisation. Between the Winners of Globalisation and Greater Prosperity for All This underlines just how necessary it is, on the one hand, to manage the processes of globalisation more vigor- Unregulated economic globalisation has resulted in a ously using international regulations and, on the other growing concentration of income and wealth among hand, put national policies in place to flank these rules. capital owners and top income earners who account for Policy makers must strengthen the capacity of states – a disproportionately large share of the »gains of globali- and those of trade unions – to shape such processes sation«. This applies as much to strong export-led ad- again, both through international coordination within vanced economies, such as Germany, as to developing fora such as the ILO, UNCTAD, WTO, and G20, and in and emerging economies. As a consequence, over the the context of trade agreements, for instance by incor- past few decades a global elite has emerged comprising porating labour standards. Ideally, and while allowing the winners of globalisation, the »one per cent« whose for the different levels of development of countries, pol- influence, including over political authorities and dem- icy changes must aim for a level playing field of high ocratic institutions, is constantly increasing. It has been labour standards and workers’ rights in order to move made a lot easier for companies to invest abroad. This away from competition over wages and employment has boosted their bargaining power over workers and conditions towards competition based on innovation, trade unions, with the result that the threat of compa- quality, and productivity growth. nies withdrawing from a country has a disciplining effect on the nation-states. In the »locational competition« for trade and investment and in their efforts to »maintain Between Multilateral Rule-making and improve international competitiveness«, govern- and Bilateral Preferentialism ments feel constrained to follow the ruling macroeco- nomic policy paradigm. Global trade is based on the international regulatory framework governing cross-border trade in goods and Thus, in the rich countries, it is mainly the lower-skilled services codified within the World Trade Organization workers – those who are particularly vulnerable to wage (WTO). In the WTO, each of the current 164 WTO mem- competition from low-wage countries – who are the ber states has a single vote, irrespective of its economic losers of globalisation. Over the past decades, real in- size or importance, and decision-making is consensual. come has stagnated in many OECD countries, including The WTO is the only international organisation that has Germany; in some countries even declining in absolute a highly respected dispute settlement mechanism which terms. This remains true even if we account for the ben- is frequently used by its members and whose arbitration efits to consumers provided by cheaper imports. Where rulings are for the most part observed and implemented. whole industries are affected by competition from cheap The process for resolving trade disputes is seen by many imports, frequently entire regions suffer from forced as the WTO’s most important success to date, where- structural change, and are cut off from the economic as the WTO as a negotiating forum for continued trade development of the rest of the country. liberalisation and market integration has been in crisis now for many years. Since the early years of the new mil- In the poor and the emerging countries, too, the ad- lennium, the dynamics of multilateral negotiations have vantages of globalisation fail by far to benefit everyone. changed completely. Before, it was mainly the EU and

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the USA who dominated talks. The increasing influence cessions to third countries without the latter having to of developing countries and emerging economies has reciprocate, or at least keep the option of subsequent brought to the fore the conflicting interests which have accession open. persisted in the WTO since it was created. The Doha De- velopment Round, the first round of multilateral nego- Although the trend towards new bilateral and regional tiations under the aegis of the WTO, officially launched agreements is likely to continue apace, if only for reasons in 2001, quickly stalled due to its complex negotiation of geo-economics and power politics, one of the key agenda. Indeed, the original approach taken in negotia- trade policy objectives is still to maintain and strength- tions – that new rules must be agreed collectively in an en a rules-based, multilateral trading system that does indivisible package (»single undertaking«) was de facto more to counteract power asymmetries. This is certainly abandoned some time ago already. Now, an incremental in the interests of the many smaller countries and devel- approach is taken to negotiations and solutions to indi- oping countries in particular which, thanks to the con- vidual issues in the Doha mandate are sought. However, sensus principle, are in an infinitely better negotiating to date the only agreement with any influence that will position in a multilateral context. This is also necessary result in substantial cross-border trade facilitation and to prevent a new fragmentation in today’s globally in- cost savings is the Trade Facilitation Agreement, which terconnected economic areas and ensure that trade dis- was agreed in Bali in 2013 and entered into force at putes continue to be settled in a fundamentally fair and the beginning of 2017. The farther-reaching attempt to objectively sound manner. However, given the current put what are referred to as »new issues« such as digital ongoing deadlocks, it is becoming clear that new issues trade on the table has been unsuccessful due to resist- will be driven predominantly by coalitions of like-minded ance from many developing countries, which insist that states and will generally culminate in agreements which the prerequisite is the conclusion of the Doha Round. (at least initially) not all WTO member states will be part Finally, with the new US administration under President of. Difficulties and challenges will be encountered when Trump, the multilateral system has come under serious trying to design these agreements in such a way that additional pressure, albeit in other, very different ways. they adhere to the WTO regulatory framework, do not place other countries at a disadvantage, enable subse- Due to the deadlock in the WTO and pressure from quent accession, and can thus act as a basis for subse- strong trading powers, the trend toward bilateral and quent multilateral rules. regional trade agreements, or preferential agreements, has become more pronounced. Almost 300 WTO-reg- istered agreements of this kind are currently in force. Between Economic Objectives and Sustainability There are quite pragmatic reasons for this: it is much easier to achieve results as well as to draw up innovative To date, issues of social justice, environmental sustain- trade policy regulations in a bilateral context or among ability, or cultural diversity have either not featured at a small group of states with common interests than in a all or only played a marginal role in the actual design of multilateral context. In particular, regulations which are trade policy. The strong emphasis on purely economic technically complicated, affect other policy fields, and criteria is not consistent with and indeed undermines at the same time seriously impinge on countries’ sov- other social objectives. ereign rights require a certain level of mutual trust that simply does not exist on a multilateral level. Essentially, In New York in 2015, the United Nations adopted 17 however, all exclusive regulations, where negotiations Sustainable Development Goals (SDGs), thus creating a have only involved a small number of countries, carry common overarching framework. The SDGs represent a the risk of disadvantaging those countries which have commitment by all actors – states, institutions, and in- not participated but which may as well be directly or dividuals – to develop coherent policies to contribute to indirectly affected. On the other hand, trade rules and economic, social, and environmental sustainability. The market openings negotiated on a regional or »plurilat- purpose of trade policy should be to further these goals. eral« level can also benefit third parties provided that, based on the most-favoured-nation (MFN) principle, the The Sustainable Development Goals seek to strike a bal- signatories also unilaterally extend the agreed trade con- ance between the different dimensions of development

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and ensure that they are ranked equally. This includes Sustainability must become the most important guiding ensuring that gender equality is factored in to every principle not only in cross-border trade in finished goods. policy field and a gender-sensitive approach is taken to Supply chains and value chains within transnational com- political decisions. For EU trade policy this means that pany and production networks are increasingly defining existing instruments must be applied more effectively the global economy and thus also global trade flows. or redefined entirely. For instance, although Sustaina- However, the regulations needed to establish a frame- bility Impact Assessments (SIAs) are carried out for all work for social and environmental sustainability in glob- EU trade agreements, in political terms they currently al production processes have, so far, not been able to play only a minor role. Even within the framework of keep pace with changing forms of production. The fact the General Scheme of Preferences (GSP) for developing that a country is integrated into a global supply chain, countries, too few incentives are provided for countries in other words that it manufactures one or several parts to develop socially and environmentally sustainable as of a particular good, does not reveal anything about ei- well as gender-just policies. ther the quality of the added value or the contribution to sustainable development. Although Asian countries The relationships between trade policy and migration are most likely to benefit from being integrated into in- are very complex and there are generally no simple ternational trade, even they are frequently involved in explanations for migration movements. However, it is production processes which barely allow them to add important to identify approaches that could enable us, value. Contract manufacturers in developing countries in future, to prevent potential negative effects of trade are often faced with strong competitive pressure from liberalization that may force people to migrate. At the within their own country but also from neighbouring same time, we must use opportunities to reinforce the countries; low wages and inhumane working conditions positive effects of trade agreements more effectively so are frequently the consequence of this. This situation as to increase employment in partner countries. is caused, on the one hand, by tough competition between international corporations, brand manufacturers, If we were to resolutely pursue the SDGs, this would and major retail chains which act as lead firms in global help overall at least to reduce the existing contradictions supply chains, and, on the other hand, by the massive in the development cooperation between industrial and power disparity within value chains that allows them to developing countries. This applies, for instance, to the dictate prices to their suppliers. The suppliers, in turn, EU’s fishery and agricultural subsidies. The SDGs also are forced to continuously lower the costs of produc- call for more freedom in defining and pursuing national tion, for example by lowering employment standards in policy objectives such as the development of domes- their production plants. Ultimately, it is the workers who tic industries or the implementation of standards. For have to pay the price. Also, the integration of developing poorer countries, this should mean, for example, that countries in such global supply or value chains remains they would be allowed – within the framework of WTO highly uneven. Sub-Saharan African countries in particu- rules – to use subsidies or targeted import and export lar barely participate in industrial value chains at all. restrictions as industrial policy tools. Moreover, their policy space should not be overly restricted by bilater- A sustainable trade policy must contribute to improving al free trade agreements. What has to be tackled as a the life chances, particularly of young people, in devel- matter of urgency is the imbalance in world trade to the oping countries and emerging economies and much less detriment of the poorest countries. This was already ac- so to increasing the power and wealth of already rich knowledged in the WTO Ministerial Declaration in 2001. and influential elites.

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Guiding Principles for a Social Democratic Trade Policy

For German social democracy trade policy is a key in- tions must follow politically defined rules. We want a strument for shaping globalisation. Trade policy must fair and democratic trade regime. For us, this means a be based on fair multilateral rules and incorporate all trade regime in which the goods that are traded on our aspects of sustainability, particularly social and environ- markets are produced under fair social and environmen- mental sustainability. Economic aspects have taken pri- tal conditions and human rights are respected; in which ority for far too long. Germany relies, more than almost we strive to safeguard and improve the development any other country, on open markets and a well-function- prospects of our trade partners in the global South; in ing global economy, in recent years deriving particular which trade strengthens rather than undermines rights; benefit from the further integration of global markets. in which the government’s capacity to provide public However, parliaments and governments must impose services both here in Germany and in our partner coun- rules on the markets and, in order to be able to do so, tries is not restricted; and in which we give multilateral they need to secure political room for manoeuvre and approaches precedence. opportunities for democratic participation. However, an equitable trade regime cannot develop be- Trade policy has an impact on the everyday lives of many hind closed doors: secret negotiations have damaged people – in Germany, and indeed the world over. Social the public’s trust in political processes and the accepta- democratic trade policy is, therefore, not an end in itself bility of trade. Thus, it is not only the content of trade but serves broader objectives. Our trade policy is geared agreements that has to change but the whole negoti- towards the United Nation’s universal Sustainable Devel- ating process. Social democratic trade policy therefore opment Agenda (2030 Agenda) and seeks to contribute also comprises transparency in terms of content and the to achieving the agenda’s goals (SDGs) as well as those people involved in a trade negotiation. On this basis, it of the Paris Agreement on climate change. Trade policy includes public debate on trade policy objectives as well therefore cannot stand alone but must be embedded as a strong involvement of parliaments in the negotiat- in a comprehensive strategy that also includes policy ing process. changes in, among others, the following areas: regulation of financial markets; agricultural policy reform; in- What we need, therefore, is a new trade policy, one dustrial, labour market, and structural policy approach- which rebuilds trust, strengthens democracy and the es; and education, environmental, and development rule of law, and enforces justice. This will not necessar- policy. Trade policy is within the exclusive competence ily be a straightforward task or one without contradic- of the EU. The European level and European policies are tions. However, social democracy was often successful therefore of particular significance. Here, the foundation in the past when it was active at the interface between of all policy changes must be the further social integra- different forms of political, social and economic logic. tion of Europe, something social democratic parties all This ability to think and act together is now in need of over Europe are fighting for. renewal, also with regard to international trade policy. And this challenge can only be met in alliance with oth- Social democratic approaches differ fundamentally from ers, with our partners in Europe and in international in- that of free-market liberals: we believe that trade rela- stitutions, with trade unions and NGOs.

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A Social Democratic Reform Agenda

1. An Inclusive and Solidarity-based Approach So-called »plurilateral agreements« could supplement to Redesigning the Trade Architecture the tough multilateral negotiations in some fields or, in some cases, even replace them. Two recent precedents Multilateral and Plurilateral are the Information Technology Agreement (ITA-2) con- cluded in 2015 at the WTO Ministerial Conference and The WTO must retain its central role in the international the planned Environmental Goods Agreement (EGA) un- trading system as a monitoring, enforcement, and dis- der negotiation until talks were suspended in December pute settlement body. Owing to its multilateral struc- 2016. ture, the WTO also ensures equality between poorer and richer countries at the negotiating table. Trade poli- An important point here is that plurilateral agreements cy must not be power-based but instead rules-based. A with EU participation must always be negotiated as strong WTO is needed to ensure this. »open« plurilateral agreements, in other words on the basis of the most-favoured nation principle and under However, this does not answer the question of wheth- the auspices of the WTO. Where issues of market access er rules that have been agreed on are always expedient are regulated, agreements of this type would generally and fair, or at least up to date. For example, the extent only come into force once a »critical mass« (80 to 90 to which countries, particularly from the developing per cent of global trade in the goods or services cov- world, should be granted some wiggle room to inter- ered by the agreement) has been reached. This prevents pret rules and the space for defining and applying their important market participants from profiting from the own policies (»flexibilities«) is one of the key questions agreed trade facilitations as »free riders« without having and bones of contention. In this context, despite the to make any trade concessions themselves as contract- sustained criticism of many of the existing WTO rules, ing parties. its two-stage dispute settlement mechanism has, on the whole, proven to be an accepted authority in regulating From a development policy perspective we should trade disputes. This mechanism plays an important role seek to involve as broad and as representative a group in ensuring that markets remain open and cross-border of developing countries as possible in such plurilater- trade adheres to the mutually agreed rules. At the same al negotiations. In addition, the available expertise in time, the dispute settlement mechanism prevents the international organisations should be harnessed much fragmentation of the international trade system. Hav- more systematically. Organisations such as the WTO, ing said that, ever since the US administration began to UNCTAD, ITC, ILO and possibly other international or- systematically block the regular appointment of judges ganisations should cooperate more closely. For exam- to vacant positions in the WTO Appellate Body, it has ple, it could become mandatory to have representa- been less and less capable of pursuing cases. Resolving tives of the ILO and UNCTAD participate in multilateral this stalemate is at present the most pressing challenge (and plurilateral) trade negotiations in a consultative facing WTO member countries. capacity.

Against the backdrop of the deadlocked trade negoti- In contrast, »exclusive« agreements which are not open ations and in parallel with the ongoing multilateral ne- to all WTO member states and thus contribute to the gotiations on the traditional Doha themes, coalitions fragmentation of the international trade system should, of states with the involvement of the EU are now also in principle, be rejected. One such exclusive agreement increasingly initiating talks on new topics that not all would be the Trade in Services Agreement (TiSA), at WTO member states are interested in pursuing. In re- least as it had been conceived so far. Until they were cent years, many countries have shown an interest in suspended towards the end of 2016, the TISA negoti- WTO negotiations being conducted on new areas of ations had been held largely in secret and outside the regulation such as investment or digitally-enabled trade. context of the WTO.

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Bilateral / Regional and Unilateral 2. Strengthening Democratic Processes and Transparency in Trade Policy A major challenge related to negotiations for bilateral and regional agreements is how to achieve a better Democratic participation in trade policy is vital for the balance between the benefits for member states and future of trade agreements: if the latter are to win ac- the risks for third parties and the multilateral trading ceptance and achieve democratic participation, who system as a whole. For the EU, this means making sure should be involved and how much say should they have? that such preferential agreements are open and acces- Debate over how we want to live in the future should sible to third countries, as the only way to reduce such not be left to executive bodies and authorities; parlia- risks. Important tools for this are, for instance, acces- ments with the directly elected representatives of the sion clauses for third countries and transparent regula- people are the place where these discussions have to be tory cooperation. Only where no progress can be made led and decisions taken. within a multilateral framework should EU trade policy be able to switch to bilateral and regional agreements. Parliaments should therefore make full and active use Here, the basic principle must be, firstly, that the re- of the opportunities for democratic control of the EU spective trading partners commit to high standards Commission and the Council of Ministers provided with- and, secondly, that joint efforts to improve labour law in the framework of the 2009 Treaty of Lisbon. On the and environmental and consumer protection standards one hand, this requires the European Parliament’s rights are clearly set out in the agreement. Also, it must be of control and participation to be further reinforced and, ensured that the EU’s precautionary principle will not on the other hand, it requires the national parliaments be restricted in any way by such bilateral or regional to be fully informed and participate actively. In addition, trade agreements. we need to ensure that the public receives far more in- depth information and has better participation opportu- Within the framework of its General Scheme of Prefer- nities and rights. ences (GSP), the EU grants poorer developing countries (»low« and »lower middle-income countries«) unilateral This includes the timely publication of all the EU Com- tariff preferences for certain goods, going as far as to mission‘s fundamental negotiating positions during on- grant duty and quota free access for Least Developed going negotiations – and, in the spirit of transparency, Countries (LDCs) to the EU markets for everything apart ideally the positions of the relevant trade partners, too. from weapons within the framework of the »Everything In addition, it includes greater participation by the Euro- But Arms« (EBA) initiative. To make it easier for countries pean Parliament’s elected representatives already ahead to take advantage of the market access offered, various of negotiations. The European Parliament’s transparen- steps should be taken, including further simplifying the cy initiative has already begun to pave the way for this: rules of origin and extending the cumulation of origin to in future, the EU Commission will be publishing all the components from developing countries. drafts of its negotiation mandates. Increased participation should entail Member States, in future, being Under the current administration, the US no longer plays obliged to wait for the European Parliament to adopt a its traditional key role in shaping international coopera- formal position before deciding on a negotiating man- tion and governance regimes. Other actors will fill the date. The European Parliament should then also have resultant gap. This presents both risks and opportunities. access to this mandate. One proposal that goes beyond It means that the EU will have to play a more active role this is that, rather like in the co-decision procedure, the in shaping the international trading regime, in particular European Council and the Parliament should decide on a multilateral level. From a social democratic perspec- jointly on the granting of mandates, with the mandate tive this must include a further reform of EU trade policy being published promptly after adoption. along the lines of the guiding principles outlined here. In connection with this, if Germany and the EU are to be It must also be ensured that, during negotiations, the able to achieve their newly defined trade and global pol- European Parliament is granted full access to all negoti- icy goals, they must also be open towards new, reliable ation documents and a regular exchange of information cooperation partners. takes place with the Member States and European Com-

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mission. These are the prerequisites for the European al frame of reference for labour legislation. However, Parliament to be able to critically monitor and effectively these standards are not yet part of the WTO’s regula- influence ongoing negotiations, as is necessary. tory framework. Nevertheless, labour standards are increasingly being included in bilateral and regional trade Nevertheless, for trade policy measures to be acceptable agreements negotiated by the EU, the USA, and a num- in an age of »deep trade agreements« and greater Eu- ber of other countries, frequently with reference to the roscepticism, active participation by Member State par- ILO core labour standards. For all future EU agreements, liaments is more pressing than ever before. The German not only will ILO standards always have to be accepted Bundestag committees should therefore make more ac- as universal worker rights by the respective trading part- tive use of the opportunities for participation set out in ners; more importantly, all eight core labour standards the EU treaties and regularly request information from will also have to have been ratified before an agreement the German government on the status of ongoing EU can come into effect. Beyond that, there is often an ab- trade negotiations and adopt a position on them. Par- sence of regulations on how to sanction violations of ticularly in a policy field where the EU holds exclusive these standards. Given that the ILO itself has no binding competence, it is important that the Bundestag properly and effective sanction mechanisms, it is essential from fulfils its oversight function by laying down guidelines for a social democratic perspective to, firstly, incorporate the Federal Government which can then be presented provisions for the comprehensive protection and effec- via the EU Council of Ministers as the German position tive implementation of substantive labour rights in bi- in the negotiations. The Bundestag should therefore al- lateral and regional trade agreements, and, secondly, ready become involved even before a negotiating man- to provide for the possibility of financial compensation date is issued and should give the German government for certain serious violations of the agreed standards, specific instructions regarding the German position. with funds being used for the benefit of workers in the country, where the violations have occurred. Moreover, However, in this day and age, the parliamentary process protected labour standards should go beyond the ILO alone – whether at the EU or at the national level – will, core labour standards and also include standards for oc- in all likelihood, not be enough to generate the neces- cupational health and safety, living wages, and reason- sary acceptance for trade agreements that are conten- able working hours, all of which have been frequently tious both in terms of their content and their effects. neglected to date. The debate on the TTIP and CETA bears witness to this.

In future, therefore, not just economic interests but Participation of Trade Unions and Civil Society also other social interests and views must be adequate- ly taken into account in the negotiation process. The In the area of labour standards, the EU’s dialogue-based, EU Commission must ensure balanced participation of consensual approach to partner countries in bilateral stakeholders, both prior to the opening of negotiations trade agreements, introduced in 2007, has yet to satis- and during them, as well as in the implementation of factorily improve the situation for workers. Thus, in fu- agreements. ture, it must be mandatory to involve trade unions and other civil society organisations in the implementation of agreements. Future agreements must therefore provide 3. Promoting and Enforcing for substantially better opportunities for participation. In High Labour Standards many countries, trade unions enjoy no or insufficient protection, let alone rights of co-determination or the op- To prevent a locational competition among countries portunity to defend their rights before an independent for trade and investment that is to the detriment of the court of law. Promoting strong representative structures workers, high labour law standards are an essential ele- of workers at company levels and free trade unions, as ment of fair globalisation. well as ensuring sufficient legal, policy and participatory space for civil society must be key components of a pro- The standards established by the ILO – in particular, gressive trade policy. The permanent expert group com- the eight core labour standards – represent a glob- prising representatives of civil society organisations and

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the social partners that was recently established by the compliance with the labour standards incorporated in EU is a step in the right direction. It has to be ensured, the trade agreement and to claim compensation for the however, that the members of this expert group have workers they represent. After exhausting all national ju- full access to all of the negotiating documents and that dicial remedies, the trade unions should be able to in- objections and opinions are in fact incorporated into the voke a legal review of breaches of the agreement by the positions and specific decisions taken during negotia- panel of experts. This panel could award the complain- tions. This participation must also continue as part of the ant – or, in other words, the workers represented by the implementation process once the agreement has come complainant – fair monetary compensation, which could into effect. However, only if genuine social partners and be directly enforced by the courts of both contractual independent NGOs are represented in advisory bodies parties. This process would provide workers with the created by an agreement (such as the Domestic Advisory necessary tools to proactively enforce their rights in the Groups; DAGs), and only if they also have the tools to framework of bilateral and regional agreements. trigger action against treaty violations (e.g. violations of agreed labour standards), will trade agreements be able Both of these procedures should be structured such that to help improve the situation. they assist the cooperative implementation of the labour chapter of the agreement where relevant and, should there be insufficient willingness to cooperate, they could Enforcing Standards via Dispute Settlement ensure that the labour standards in the agreement were adhered to. Consultation and participation will not suffice if there is no further process to penalise violations of workers’ Within the WTO, developing countries have prevented rights. In future, effective dispute settlement mecha- the matter of labour standards from being put on the nisms must be put in place alongside existing cooper- agenda. The concerns of poorer countries that high ative approaches. Moreover, procedures for breach of standards will make their access to foreign markets contract regarding the violation of agreed labour stand- more difficult must be taken seriously. Adhering to and ards that can be initiated by trade unions must also be raising standards is often difficult, especially for poor- put in place. er countries because the existing financial, institutional, and personnel capacities are frequently insufficient. On For this purpose, two procedures must be integrated the other hand, the ILO core labour standards must be into all new EU trade agreements: seen as universal workers’ rights that are globally recog- nized and must be implemented. This means that in the First, in addition to the customary intergovernmental labour chapter of EU trade agreements with developing dispute settlement procedure in bilateral and regional countries, substantial country-specific obligations must trade agreements, an additional independent panel of be tied to firm commitments to support the develop- experts, specialising in labour standards, must be creat- ment of local capacities to enforce and implement la- ed. This panel of experts will be invoked by the signato- bour standards. ries in the event of suspected breaches of contract and will have the authority to make legally binding decisions Last but not least, promoting the improvement of and which, on a case-by-case basis, could go as far as im- adherence to labour standards must also be a priori- posing trade sanctions as a means of bringing pressure ty where EU trade relations with a developing country to bear on the wrongdoers to implement the changes are not regulated by a trade agreement but where the called for by the arbitrators. Sanctions could take various EU has granted its trade partner nonreciprocal tariff ex- forms, depending on the partner country in question, emptions within the framework of its General Scheme and could even go as far as suspending agreed trade of Preferences (GSP). These exemptions are granted preferences, for instance by temporarily suspending cus- under the proviso that human and workers’ rights are toms duty exemptions for certain goods. respected and solid enforcement mechanisms are in place in the event of serious violations. What is impor- Second, there should be a collective complaints proce- tant, however, is that the European Commission finally dure to give trade unions the opportunity to demand makes use of these mechanisms. This applies in particu-

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lar to those countries which have joined the »GPS+« tions. Companies around the world are now filing 60 regime. Since 2006, under a special regulation, the EU new claims against states in private arbitration tribunals has also granted non-LDC developing countries tariff every year. A number of countries have announced that exemptions for approximately two-thirds of all tariff they will withdraw from existing investment protec- lines, provided that, in return, these countries commit tion agreements or will not conclude new investment to ratifying and implementing a total of 27 international agreements if they contain an investor-state dispute set- conventions in the areas of human rights, labour and tlement mechanism. Political decisions made by demo- environmental standards, climate change, and good cratically legitimate actors should not be allowed to be governance. Here, too, partner countries need more as- undermined by foreign investors being granted special sistance in implementing and monitoring the fulfilment privileges to sue governments. of these obligations. European social democracy demands that the old ar- In December 2017, the European Parliament adopted bitration system be removed from EU Member States’ an updated anti-dumping methodology, among other existing bilateral investment agreements as well as from things to protect the compliance with labour and en- the EU Energy Charter, and that these agreements be vironmental standards against cut-throat competition overhauled accordingly. The ECJ Achmea ruling, which based on the violation of such standards. An important stated that the bilateral agreements between individual novelty here was that, when calculating the damages EU states were incompatible with EU law, confirms this suffered by European industry, any costs incurred for position. The Investment Court System (ICS) proposed in compliance with labour and social standards that are the CETA trade agreement is a step in the right direction: higher than those of the exporting country will be fac- publicly appointed judges should provide for more inde- tored into the damage calculation. The ratification of pendence, legal proceedings must be conducted trans- basic labour and environmental protection standards by parently, and there should be the option of reviewing a a country is now also a criterion for the acceptance of decision. Here, however, it is important to ensure that undertakings by exporters from this country, once the this system does not infringe the authority of the ECJ existence of dumping has been established, henceforth to deliver judgments as a final court of appeal and to to export to the EU at agreed minimum prices instead of interpret EU law. Moreover, the ICS should contribute to being saddled with punitive tariffs. better protection of a government’s right to regulate in order to guarantee not only the protection of investment Although it remains to be seen what the practical effects and property but also public interest regulations. of this will be, it does send quite an important signal against a trade policy »race to the bottom« in labour However, a reform of international investment protec- and environmental standards. tion must go further than this. As well as procedural improvements, which is primarily what the ICS proposal is offering, the substantive protection standards also need 4. Protecting the Rule of Law by Balancing to be overhauled. This should ensure that the level of Investor Rights with Investor Obligations protection does not exceed that of domestic investors. Moreover, specific areas such as labour and social law Economic actors want legal certainty. In countries with as well as public services must be permanently exempt. weak legal systems, investors have an understandable In general, national improvements in social and envi- interest in basic protective rights for their investments ronmental standards, but also measures to comply with being created through intergovernmental agreements. international obligations, such as towards climate pro- Conversely, in states with a functioning rule of law, tection, must be exempted from any legal action from such as EU Member States, there is no justification for investors. Also, cultural markets, which are often very giving foreign investors special rights that completely small and in many cases linked to a local language, re- bypass the national legal system. Investors have been quire special protection. increasingly using these clauses to interfere in legislative processes and other due processes if they perceive their Moreover, a redesign of trade policy must also be used interests as being jeopardised by government regula- to tie investor protection rights to binding investor obli-

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gations both when reforming existing investment agree- Since the introduction of the Euro in 2002, every single ments and when concluding new ones (or investment year, the growth in Germany’s exports has outstripped chapters in new trade agreements). Apart from the imports, and households, companies, and the govern- obligation of foreign investors to comply with the laws ment together earned more than they spend (on con- and regulations of the host country when implement- sumption and investment). This has resulted in a major ing an investment project, something which is already surplus in Germany’s current account which, for many part of many agreements, there are further obligations years now, has regularly been far in excess of the permis- that should be incorporated into future agreements. sible EU limit of six per cent of GDP. Such a surplus makes These relate to a variety of issues and should include: no economic sense and is politically unsustainable. an explicit ban on bribery payments and the fulfilment of certain transparency requirements (especially in the These surpluses must be reduced. In future, imports extractive sector); duties to comply with tax laws and must grow more than exports and domestic demand to desist from certain tax avoidance practices as well as (consumption and investment) must show stronger in- from illegal tax fraud, as the most important duties in creases than domestic production. In order to boost de- the field of Corporate Social Responsibility; and, last but mand in Germany and thus also import growth, there not least, the duty to respect labour and environmental must be stronger wage increases. Here, even without standards (including the core labour standards and other impinging on the bargaining autonomy of the social ILO conventions), as well as human rights. partners, the state could make a positive contribution by increasing the legal minimum wage. A more expan- Agreements to date have not provided for a reciprocal sionary fiscal policy would also be one of the most direct right of action on the part of the state against a foreign measures that would help to reduce Germanys’ current investor. The collective complaints procedure for social account surpluses. More public investment in, for in- partners described earlier would at least give employees stance, infrastructure and education, for which there is of foreign companies the option of filing legal action be- currently plenty of fiscal scope, would also contribute to fore a specialised international arbitration panel (panel increasing imports. of experts). Consideration would have to be given to in- corporating an independent right of action for affected Private investment is another important instrument with third parties into investment agreements, should it prove which Germany’s export surpluses could be reduced, impossible to provide victims of transnational invest- provided that it is possible to create a new investment ment projects with adequate access to an international dynamic which, in turn, requires more dynamic domes- court or the courts in the investor’s home state as well as tic demand. As part of the imminent transformation to- other corrective measures, either by concluding an inter- wards more environmentally friendly production meth- national treaty on »transnational corporations and other ods, greater consideration should be given to investment business enterprises with respect to human rights,« as in equipment and machinery, which, at 36 per cent, ac- is currently being negotiated at the UN Human Rights counts for a high proportion of imports. A carrot and Council, or by other means. stick approach could also help to make it more attractive for companies to invest in the renewal and modernisa- tion of the capital stock in line with environmental sus- 5. Reducing Current Account Surpluses and tainability criteria. Supporting the Losers of Globalisation From a trade policy perspective, the consistently high Germany has committed to reducing its current account duties and European subsidies in the agricultural sec- surpluses, both within the framework of the EU and the tor should be reduced and non-tariff barriers adjusted. G20, and its trading partners as well as international or- Foreign producers from emerging economies and devel- ganisations regularly remind it of its promise. Inaction oping countries should receive support in introducing on this issue is having a negative impact on Germany’s their agricultural products to the German market. This trade relations, provoking counter-reactions, prolonging would not only help reduce the current account surplus. the Eurozone crisis, and, last but not least, contributing A greater willingness to compromise in the agricultural to jeopardising the stability of the global economy. sector would also improve the EU’s position in future

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trade negotiations and would lend fresh momentum to more responsibility. The development of the process negotiations at the WTO or to bilateral negotiations with at the UN level was more complex, however. Only af- emerging economies. ter several attempts and various initiatives such as the Global Compact (1992) was the UN able to agree on a comprehensive document – the UN Guiding Principles 6. Achieving Social and Environmental for Business and Human Rights – endorsed in 2011. The Sustainability through a Coherent Trade Policy document states that advancing human rights in the context of a growing global economy is not a duty that The Sustainable Development Goals are committing should be ascribed solely to national governments (re- trade and other policies to contribute to reducing in- sponsibility to protect) but should also be the responsi- equality within countries. To ensure that trade liber- bility of businesses (responsibility to respect). However, alisation benefits all people and all groups, free trade its provisions are not legally binding, a fact that can have agreements and multilateral market opening must be dire consequences for those impacted by human rights accompanied by instruments in other policy fields. The violations linked to business activities. important areas here are, in particular, education, labour market, economic, and distribution policies. The Political pressure must be increased to push for rules Sustainability Impact Assessments (SIAs), which are now to be made binding and for rights to become legal- conducted in the EU for all free trade agreements, are ly enforceable. France has led the way with a human an effective instrument for highlighting risks and poten- rights due diligence law. The European Parliament too tially conflicting goals. The actual political significance of – responding to pressure from the social democrats – the SIAs is, however, still only marginal. These analyses passed a Conflict Minerals Regulation in April 2017, thus should be factored into the design of the agreements. In expressing its belief that global economic activity can the event of conflicting goals, it is important to ensure only lead to sustainable development if there are legally that trade rules are compatible with social and environ- binding regulations. mental sustainability. For this, binding regulations are required. The EU and its Member States must also strongly support the continuation of what is referred to as the UN This must all be supplemented by positive incentives, Treaty Process, which calls for a binding instrument at e.g., as part of nonreciprocal trade preferences granted UN level, so that it can ultimately lead to binding rules. to developing countries by the EU. Here, the proposal The EU and its Member States must therefore jettison by the European Parliament to use the revised General their previous obstructive attitude in the UN Human Scheme of Preferences (GSP) to grant additional trade Rights Council and contribute constructively to the es- preferences, if, for instance, textiles are manufactured tablishment of an international legally binding instru- in a sustainable manner, should be explored further. ment for »transnational corporations and other business This could also be extended to other products if their enterprises with respect to human rights«. These rules production methods meet social and environmental sus- must of course also apply to national enterprises. tainability criteria. In order to tackle the imbalance of power in global supply chains, the EU must strongly advocate trilateral talks 7. Placing a Stronger Focus on between trade unions, multinational corporations, and Global Value Chains local producers/suppliers. In this context, based on its experience with multi-stakeholder dialogue in the field Since the late 1970s, the international community has of sustainability standards, Germany is in a good po- been trying to develop suitable rules to address the chal- sition to add valuable momentum to the process. Ul- lenges resulting from the transnationalisation of produc- timately, it must be made crystal clear that products tion networks. The declaration on the OECD Guidelines manufactured under conditions of irresponsible cor- for Multinational Enterprises (first adopted in 1976) can porate behaviour and exploitation of labour will be be considered the first extensive instrument calling on banned from sale – on both the European market and OECD member states to ensure that enterprises assume everywhere else.

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The Authors*

Fabian Bohnenberger is writing a doctorate on multi- Hubert René Schillinger is Director of the Friedrich- lateral trade policy at King’s College London. Ebert-Stiftung Geneva office, which specializes in trade policy, human rights, and international social policy. Dr. Clara Brandi is a Senior Researcher and Project Man- ager in the Department for Global Economy and Devel- Dr. Evita Schmieg is the Team Leader of the project opment Financing at the German Development Institute »Foreign Trade in the context of the Sustainable Devel- (Deutsches Institut für Entwicklungspolitik, DIE). opment Goals« at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik, Prof. Herta Däubler-Gmelin served as Federal Minis- SWP). Before joining SWP, she headed the trade and inter of Justice (1998–2002), was a Member of the Bunde- vestment division of the Federal Ministry of Economic stag from 1972 to 2009, and Deputy Party Chairwoman Cooperation and Development (Bundesministerium für of the SPD from 1988 to 1997. wirtschaftliche Zusammenarbeit, BMZ) for 12 years.

Alexander Geiger is a trade policy expert in the Global Jochen Steinhilber is Head of Unit of the Global Policy Policy and Development Department at the Friedrich- and Development Department at the Friedrich-Ebert- Ebert-Stiftung. Stiftung.

Dr. Heike Joebges has been Professor of Economics Johanna Uekermann is a member of the SPD Party specializing in international economics at the University Board and was Chairwoman of the Young Socialists in of Applied Sciences Berlin (HTW Berlin) since October the SPD from December 2013 to November 2017. 2010. Dirk Wiese has been a member of the German Bunde- Bernd Lange is a Member of the European Parliament stag since 2013, he was Parliamentary State Secretary at and, since July 2014, Chair of the Committee on Interna- the Federal Ministry for Economic Affairs and Energy in tional Trade (INTA). 2017/2018, and since April 2018 has been Coordinator for Intersocietal Cooperation with Russia, Central Asia Dr. Matthias Miersch has been a member of the Ger- and the Eastern Partnership Countries.1 man Bundestag since 2005, and has been Spokesperson of the Parliamentary Left within the SPD group since July 2015. Since 2017 he has also been Deputy Chairman of the SPD parliamentary group.

Florian Moritz is the Head of the Economic, Finance, and Fiscal Policy Department of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB).

Dr. Sascha Raabe has been a member of the German Bundestag since 2002 and was Development Spokes- man for the SPD parliamentary group from 2005 to 2013.

Thorsten Schäfer-Gümbel has been Deputy Party Chairman of the SPD since 2013 and Leader of the SPD in Hesse and of the SPD group in the Hessian state par- * The contributions for this paper were made in an individual capacity. The views expressed are not necessarily those of the Friedrich-Ebert- liament since 2009. Stiftung or the organizations for which the authors work.

19 Imprint

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